IATA ANNUAL REVIEW 2012 Tony Tyler Director General & CEO International Air Transport Association Annual Report 2012 68th Annual General Meeting Beijing, June 2012 Contents IATA Membership 2 Board of Governors 4 Director General’s message 6 The state of the industry 10 Feature: What is the benefit of global connectivity? Safety 18 Feature: How safe can we be? Security 22 Feature: Do I need to take my shoes off? Taxation & regulatory policy 26 Feature: What is right for the passenger? Environment 30 Feature: Can aviation biofuels work? Simplifying the Business 36 Feature: What’s on offer? Cost efficiency 42 Feature: Why does economic regulation matter? Industry settlement systems 48 Aviation solutions 52 Note: Unless specified otherwise, all dollar ($) figures refer to US dollars (US$). This review uses only 100% recycled paper (Cyclus Print) and vegetable inks. # IATA Membership as of 1 May 2012 ABSA Cargo Airline Air Nostrum Blue Panorama Donavia Adria Airways Air One Blue1 Dragonair Aegean Airlines Air Pacific bmi Dubrovnik Airline Aer Lingus Air Seychelles British Airways Egyptair Aero República Air Tahiti Brussels Airlines EL AL Aeroflot Air Tahiti Nui Bulgaria air Emirates Aerolineas Argentinas Air Transat C.A.L. Cargo Airlines Estonian Air Aeromexico Air Vanuatu Cargojet Airways Ethiopian Airlines Aerosvit Airlines Air Zimbabwe Cargolux Etihad Airways Afriqiyah Airways Aircalin Caribbean Airlines Euroatlantic Airways Aigle Azur Airlink Carpatair European Air Transport Air Algérie Alaska Airlines Cathay Pacific Eurowings Air Astana Alitalia China Airlines EVA Air Air Austral All Nippon Airways China Cargo Airlines FedEx Express Air Baltic AlMasria Universal Airlines China Eastern Finnair Air Berlin ALS China Southern Airlines flybe Air Canada American Airlines Cimber Sterling Freebird Airlines Air China Arik Air Cirrus Airlines Garuda Air Corsica Arkia Israeli Airlines CityJet Georgian Airways Air Europa Armavia Comair Gulf Air Air France Asiana Airlines Condor Hahn Air Air India Atlas Air Condor Berlin Hainan Airlines Air Koryo Atlasjet Airlines Continental Airlines Hawaiian Airlines Air Macau Austrian Continental Micronesia Hong Kong Airlines Air Madagascar Avianca Copa Airlines Hong Kong Express Airways Air Malawi Azerbaijan Airlines Corsair Iberia Air Malta B&H Airlines Croatia Airlines Icelandair Air Mauritius Bahrain Air Cubana InselAir Air Moldova Bangkok Airways Cyprus Airways Interair Air Namibia Belavia—Belarusian Airlines Czech Airlines Iran Air Air New Zealand Belle Air Delta Air Lines Iran Aseman Airlines Air Nigeria Biman DHL Air Israir Air Niugini Binter Canarias DHL International E.C. Japan Airlines 2 Jat Airways MEA—Middle East Airlines SKY Airlines UPS Airlines Jazeera Airways Meridiana fly Skyways US Airways Jet Airways MIAT—Mongolian Airlines South African Express UTair Jet Lite Montenegro Airlines SriLankan Airlines Vietnam Airlines JetBlue Nippon Cargo Airlines Sudan Airways Virgin Atlantic Jordan Aviation Nouvelair SunExpress Virgin Australia International JSC Nordavia—RA Olympic Air Surinam Airways Airlines Kenya Airways Oman Air SWISS Vladivostok Air Kingfisher Airlines Onur Air Syrianair Volaris Kish Air PAL—Philippine Airlines TAAG—Angola Airlines Volga-Dnepr Airlines KLM Pegasus Airlines TACA VRG Linhas Aéreas Korean Air PGA—Portugália Airlines TACA Peru White Airways Kuwait Airways PIA—Pakistan International TACV Cabo Verde Airlines Wideroe LACSA Airlines TAM—Transportes Aéreos Xiamen Airlines LAM—Linhas Aéreas de PLUNA del Mercosur Yemenia Moçambique Precision Air TAM Linhas Aéreas LAN Airlines Qantas TAME—Linea Aérea del LAN Argentina Qatar Airways Ecuador LAN Cargo Rossiya Airlines TAP Portugal Associate Members LAN Perú Royal Air Maroc TAROM LAN Ecuador Royal Brunei Thai Airways International Austral Lauda Air Royal Jordanian THY—Turkish Airlines Lufthansa CityLine Libyan Airlines SAA—South African Airways Tianjin Airlines Safair LOT Polish Airlines SAS TNT Airways SATA Air Açores Lufthansa Saudi Arabian Airlines Transaero Virgin Australia Airlines Lufthansa Cargo Shandong Airlines TransAsia Airways Luxair Shanghai Airlines TUIfly Mahan Air Shenzhen Airlines Tunis Air Malaysia Airlines SIA—Singapore Airlines Ukraine International Airlines Malév SIA Cargo United Airlines Malmö Aviation Siberia Airlines Martinair Cargo Sichuan Airlines Mas Air Silkair 3 The Board of Governors Peter Hartman Chairman IATA Board of Governors 2011-2012 4 Khalid Abdullah Almolhem Naresh Goyal Titus Naikuni SAUDI ARABIAN AIRLINES JET AIRWAYS KENYA AIRWAYS Richard Anderson Peter Hartman Masaru Onishi DELTA AIR LINES KLM JAPAN AIRLINES David Barger James Hogan Calin Rovinescu JETBLUE ETIHAD AIRWAYS AIR CANADA David Bronczek Harry Hohmeister Emirsyah Satar FEDEX EXPRESS SWISS GARUDA Yang Ho Cho Thomas Horton Vitaly G. Saveliev KOREAN AIR AMERICAN AIRLINES AEROFLOT Andrés Conesa Alan Joyce Jean-Cyril Spinetta AEROMEXICO QANTAS AIR FRANCE - KLM (representing AIR FRANCE) Enrique Cueto Hossam Kamal LAN AIRLINES EGYPTAIR Antonio Vázquez IBERIA German Efromovich Temel Kotil AVIANCA TURKISH AIRLINES Willie Walsh International Airlines Group Christoph Franz Liu Shaoyong (representing BRITISH LUFTHANSA CHINA EASTERN AIRLINES AIRWAYS) Rob Fyfe Samer Majali AIR NEW ZEALAND GULF AIR Goh Choon Phong Siza Mzimela SINGAPORE AIRLINES SOUTH AFRICAN AIRWAYS 5 The air transport industry is fragile. Airlines made a profit of $7.9 billion in 2011. That is half of the $15.8 billion profit realized in 2010. And on 2011 revenues of $598 billion, that translated to a net profit margin of just 1.3%. The current year promises to be more challenging. April was the 15th month with oil prices above $100 per barrel (Brent). Fuel now accounts for over 30% of average operat- ing costs. A decade ago, it was 13%. A further price spike could easily push the industry into losses. Airlines are similarly vulnerable to economic cycles. Historically, the airline industry has pro- duced a collective loss when GDP growth falls below 2%. In April 2012, the Economist Intelligence Unit was predicting growth of 2.2%. Political insta- bility continues in the Eurozone as it grapples with the sover- eign debt crisis. The United Kingdom and Spain have already gone back into reces- sion. If others follow, the ripple effects would most certainly be felt in all global markets. 6 The Director General’s message In the face of such strong head- 2011 was the safest year for providers, and manufacturers political gains of high taxes, winds, keeping revenues ahead civil aviation. There was one reiterated their commitment to misguided regulations, and of costs is a major challenge. hull loss for every 2.7 million improve fuel efficiency 1.5% growth restrictions. We still expect airlines to make flights with Western-built jets— annually to 2020, to achieve a collective profit in 2012. But a 61% improvement on the carbon-neutral growth from Job creation is a priority of all it will be razor thin. Conserving performance a decade ago. The 2020, and to cut net emissions governments. Aviation can help. cash, carefully matching capac- IATA Operational Safety Audit in half by 2050 compared with Already our industry supports ity with demand, and managing (IOSA) is making a difference. 2005 levels. the livelihoods of 56.6 mil- costs will remain the focus for Airlines on the IOSA regis- lion people and $2.2 trillion in most airline managements. try—some 375—outperformed Governments are important economic activity. And govern- the accident rate for non-IOSA partners in meeting these ments must understand that Behind the scenes, IATA has operators by 52%. targets. They must implement with an enabling policy environ- redoubled its efforts to man- policy measures that de-risk ment we could do much more. age the industry’s settlement Together with the International investment in sustainable biofu- When aviation gets stronger, so processes reliably. Fully $367 Civil Aviation Organization els, unlocking their potential to does the economy. billion passed through IATA’s (ICAO), the US Department reduce aviation’s carbon foot- financial systems in 2011. The of Transportation, and the print up to 80%. And they must I am passionate about aviation. Billing and Settlement Plan— European Union, we con- agree on a global approach to As the Director General and the largest among IATA’s finan- tinue to build the Global Safety positive economic measures CEO of IATA I have proudly cial services—settled nearly Information Exchange. This through ICAO. Progress is sung aviation’s praises and $250 billion in volumes with collection and sharing of data being held back by the global advocated policies and partner- 99.971% accuracy. We are will enable analysis for targeted backlash against the extra-terri- ships that support its success. determined to do even better. programs to make our safe torial inclusion of aviation in the I thank the IATA Board of industry even safer. EU Emissions Trading Scheme Governors and our members IATA is strengthening its settle- (ETS). ICAO offers a process and partners for their great ment systems. By migrating Security processes must evolve to reach the global consen- support in helping IATA help the functions to regional hubs, we to be risk-based and data sus that all parties—including industry. will operate to a single global driven. Our flagship security Europe—desire. standard on fully integrated IT programs—Checkpoint of the Aviation is indeed fragile. But systems. The migration will take Future and Secure Freight—are The ETS impasse highlights by working together,